What is an alta loan policy

In 2006, the American Land Title Association (ALTA) adopted revisions to its standardized forms of title insurance policies. The 2006 forms are intended to replace the 1992 forms of owners and lenders policies.

The 2006 ALTA owners and lenders policies of title insurance are designed to expand and more clearly state the coverage for insuring the risks to owners and lenders of non-residential properties. The rights, duties and responsibilities of the title insurer and the insured are clarified in the 2006 title policies.

There are now ten covered risks set forth as affirmative coverage in the 2006 form owners policies. There were four covered risks in the 1992 form policy. There are fourteen covered risks in the 2006 lenders policy compared to eight in the 1992 lenders policy. ALTA re-formatted the policy and expanded policy coverage to demonstrate to consumers and client groups the extent and limits of coverage more clearly.

One expansion and clarification is the extent of coverage for matters that ordinarily would be revealed in a survey. Previously such survey protection was only provided by endorsement. The 2006 form policy expressly provides survey coverage including encroachments of improvements onto adjoining land. The purchaser of non residential land now enjoys protection for encroachments and other intrusions that an accurate and complete survey would disclose unless the survey coverage is expressly excepted in the policy. The policy’s coverage assures the risk of loss that the owner sustains from matters that would be disclosed in an accurate and complete land survey.

The ALTA 2006 policy covers an encroachment or other matter if it would be shown on a survey. Risks of loss resulting from survey matters had been covered by endorsement to the policy. On the other hand, if the matter would not be revealed in a land survey such as an overlapping legal descriptions of adjoining parcels or a shortage in area of the land insured then the ALTA policy does not cover it.

Secondly, the 2006 policy now expands and clarifies the affirmative assurances for creditors’ rights. Covered Risk 9 of the owner’s policy and Covered Risk 13 in the lender’s policy have been added to

the 2006 form policies. The policies assure the insured owner and insured lender against the loss they may sustain by avoidance of their deeds resulting from the overturning of a prior conveyance as a fraudulent transfer or preference. The policies protect the insured owner and insured lender against avoidance of their own deeds as a preference if the deeds were not timely recorded or failed to impart constructive notice to a purchaser for value or to a judgment or lien creditor.

The creditor’s rights coverage was clarified in the ALTA 2006 policy. The insured is now clearly protected from an attack of a predecessor’s deed or of the insured’s deed due to a failure to record and impart notice of the deed binding upon a bankruptcy trustee.

In addition to the foregoing expanded covered risks re-written to more clearly state the survey and creditors’ rights conveyances, the 2006 policy expands the definition of the insured. Now, the policy expressly includes the insured’s wholly owned entity within its definition of insured. The named insured’s wholly owned entity is entitled to the benefits of the policy. No longer will the named insured jeopardize their policy benefits by estate planning transfers. A trustee or beneficiary of a trust created by the named insured for estate planning purposes is defined to be an insured. Moreover, transfers between an insured and their wholly owned entity do not jeopardize coverage. No longer will the named insured jeopardize their 2006 title policy benefits by a corporate re-structuring.

There are other revisions to the 1992 ALTA form policy. In many instances, the coverage that many practitioners had obtained by endorsement to the 1992 form title policy for non-residential transactions are now incorporated into the ALTA 2006 form policies.

Title Resources Guaranty Company has made the ALTA 2006 form policies available to its Arizona agents for issuance.

This article is made available with the understanding that it is informational only, and it has not been prepared to provide specific legal advice that may be relied on by a reader. The author is under no obligation to update the information in the event of a change in the law.